Key levels for the US Dollar Index and major US indices
It’s not easy to find points of interest in the rather dull August markets but I have spotted a couple of things worth pointing out for this week.
The US Dollar Index has reversed course after hitting what I thought was a relatively minor resistance trendline. You can see this in the weekly chart below.
I thought the reaction would be a minor correction to ease overbought conditions. Initially we bounced from the first target and support at 95.00/94.80. In the daily chart below you can see the purple 55-day moving average, 23.6% Fibonacci and two-month trendline offering support at this level.
The index bottomed exactly here in the third week of August and I expected a strong bounce. However this was not to be and the index fell at the first hurdle. This was the shorter-term 23.6% Fibonacci level, just above the green 500-day moving average as you can see in that daily chart above.
This week we have unexpectedly broken below the support area at 95.00/94.80. This of course means the area has become resistance, despite the oversold slow stochastic at the bottom of the chart.
It is worth looking at the 60-minute chart today which also shows a shot higher to trendline and 23.6% Fibonacci resistance at the 9500 area. Clearly the outlook turns negative as long as we hold below here. Bulls need to stabilise prices above 9500 to be back in control and prove this to be a false break lower.
Downside targets now are 9420/10, 9394/90 and 9373/71.
Focus on US indices
The US stock markets have made a remarkable recovery with a steady bull trend since the start of July. The E-mini Dow Jones daily chart below shows a clear upward-sloping channel and as you can see we have stalled exactly at the upper trendline of this channel.
The dojis indicate that the rally has run out of steam in severely overbought conditions. It would certainly not be a surprise to see some profit-taking therefore.
The 60-minute chart below gives us some targets on the downside. We do need at least a small correction! On the downside look for 26185 and minor support at 26040/020. Below 26000 targets 25950/940 then strong support at 25880/070. Try long positions with stops below 25810.
However, a break above 26215 targets 26280, 26310, 26380/390 and perhaps as far as 26415.
Emini S&P 500 hits four-month trendline resistance as you can see in the daily chart below. Although prices are trying to make a break above the trendline, the dojis indicate a lack of follow-through. With the trendline holding in the E-mini Dow Jones, I will favour a short-term bout of profit-taking.
As you can see, we are severely overbought on the stochastic. This may help to trigger a small correction.
Failure to beat the new all-time high of 2906 targets yesterday’s low at 2895/94, then 2990/89 and perhaps as far as 2982/81. On further losses look for 2875/74 with strong support at 2870/68. A break above 2909, however, targets 2916/17 and 2921/23.
Technical Analyst & Trader
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